Investors gave money to T for trades, and Mr C, T’s director, permitted the money to be transferred to Versailles Trade Finance Ltd, where he held shares, and then Versailles carried out fraud, raising its share price, whereupon Mr C sold his shares for £28.69m. Versailles was discovered, and it was put into receivership. T had lost money because of Versailles activities, and was also put into liquidation. T claimed a proprietary interest in Mr C’s profits from the sale of shares, which were an unauthorised gain in breach of fiduciary duty, and held on constructive trust. Banks had been reimbursed by receivers for money they had lent to Versailles, and T claimed it could also assert its claim against them.
Lewison J,  EWHC 1614 (Ch), held that the Court of Appeal decisions in Metropolitan Bank v Heiron (1879–80) LR 5 Ex D 319 and Lister & Co v Stubbs (that a trustee had an equitable duty to account, but there was no proprietary interest) had not been overruled in England, and still remained binding. He held there were two kinds of constructive trust cases, (1) where the trustee owed duties in relation to the trust property before receipt of it (2) where the defendant had no connection or fiduciary duties in relation to bribe money before they were paid over. Here, no trust would arise. T had no proprietary interest in the proceeds of the sale of the shares, and even if they did, the banks were bona fide purchasers, and the claim could not be asserted against them. However, T did have a proprietary claim to money passed to Versailles, that Versailles mixed with its own, and could thus trace it into the sums given by the receivers to the banks. So the questions on appeal were (1) did T have a proprietary interest in the proceeds from the sale of shares (2) could it claim against the banks, or did they have a bona fide purchaser defence (3) was the limit on tracing correct. T argued that Attorney General for Hong Kong v Reid should be followed.
Lord Neuberger MR held that the old Court of Appeal authority was binding, and T only had a personal claim in equity over the assets.  prior Court of Appeal authority was binding, unless shown to be per incuriam or of doubtful reliability. - T had no proprietary claim over the proceeds from the sale of shares. Although the share profits could not have been received without Mr C having had his fiduciary office, the proceeds were not beneficially owned by the T. The claimant could not get a proprietary interest rather than an equitable account for the money acquired in breach of trust, unless it had already been beneficially the property of the beneficiary, or the trustee acquired it by taking advantage of an opportunity or right that was properly that of the beneficiary. This should be distinguished from property obtained simply by being in the position of a fiduciary. There was a personal claim in equity to the funds. Mr C did not owe trustee like duties in relation to the shares, Re North Australian Territory Co  1 Ch 322 and Powell v Evan Jones & Co  1 KB 11 considered.  even if T had a proprietary claim over the proceeds of sale of the shares, the banks had had no notice of it when they received, and so Lewison J was entitled to decide that the banks took free of the claim.  the banks had no notice of T’s proprietary interest in the mixed fund before the time it was claimed back. The banks and receivers had acted in good faith, even though they might have properly sought legal advice about whether there was a proprietary interest in the mixed fund. Richards LJ and Hughes LJ concurred.